MADISON, Wis. (9/28/12)--Savings accounts may be a better option than certificates of deposit (CDs) in 42% of U.S. states, according to the most recent study by Go Banking Rates.
CDs--long regarded as the high-yield alternative to traditional savings accounts--no longer provide a sure bet in economic conditions that have essentially leveled the playing field, the study said.
Go Banking Rates collected the average savings account rates and average six-month CD rates offered by credit unions and community banks in each state, and in Washington, D.C., as well as national and online banks. It then compared the difference in return between both deposit products. While CD interest rates were higher than savings account rates in nearly every instance, the interest-rate gap between the two products may not always be wide enough to warrant locking in funds for a six-month commitment, said Go Banking Rates.
The difference between savings and average CD rates is 0.1% or less in 42% of the states. In Delaware, for example, average savings account rates are higher than that of six-month CD rates. It's not until depositors reach two-year CD terms that they stand to earn about one percentage point higher in interest than a traditional savings account offers.
Most consumers will find that the liquidity offered by a savings account is worth the slightly reduced interest rate in these states, and should opt for a savings account over a short-term CD if immediate access to funds is a concern, the study indicated.
However, in states such as West Virginia, Minnesota and Maine, where average six-month CD rates are closer to 0.2% higher than average savings account rates, it may be worth it to agree to limited accessibility in order to give savings that extra boost, the study said.